All you need to know about fleet insurance

All you need to know about fleet insurance

By Craig Thomas on Apr 04, 2017

Insurance premiums are on the rise again, with the AA British Premium Insurance Index [1] showing a steady rise over the last two years and an 11.7% increase over the course of 2016.

There are many reasons for these increases, according to Michael Lloyd, director of AA Insurance: “Uninsured driving is rising, partly because of the increases in Insurance Premium Tax. Plus fraud, particularly whiplash claims, continues to dog the industry.”

These increases have an even greater impact on fleets, as they are multiplied by the number of insured vehicles.

Thankfully, fleet managers have options.

One of these is self-insurance, a strategy that can take a couple of different forms.

The first involves lodging a £500,000 bond with the government, in line with the Motor Vehicles (Third Party Risks Deposits) Regulations of 1992. The money can then be used to pay third-party claims in the event of any at-fault collision.

Fleets that decide to take this option are able to meet all the insurance requirements of the Road Traffic Act (RTA) 1988, but still need to pay for repairs to their own vehicles. And they also need to manage the costs of their liabilities with third parties, so a form of insurance is still required.

As this is an option that is limited to companies that have cash reserves large enough to cope with handing over £500K it's not one open to many businesses.

Peter Blanc, group chief executive of insurance broker Aston Scott Group, told Fleet News recently: “Virtually no business on the planet actually completely self-insures – the risks of having to pay a multi-million-pound loss are too great for almost any commercial enterprise to bear.”

A more realistic alternative is to take out third-party insurance cover, which means the fleet takes the risk of any collision damage to its vehicles.

Instead of taking out fully comprehensive policies with an excess of up to £500, just paying for third-party cover can save fleet managers significant sums on premiums. If you do your homework and look at costs over the last two or three years – establishing what the average historical costs are from at-risk collisions – you could find the savings you make on switching policies could be set aside to cover repairs and write-offs.

Any money left over could be invested in greater risk mitigation, such as driver training or adding features like advanced driver assistance systems to new vehicles as the fleet is refreshed at the end of lease contracts.

As Blanc says: “This, in its simplest form, is a type of self-insurance – you simply calculate the risks of losses happening, establish how much premium you are paying to insure against that risk and you simply decide not insure against those risks.”

Another way of reducing the cost of fleet insurance is to establish proactive anti-fraud policies. The Association of British Insurers (ABI) [2] estimates fraud adds an average of £50 to the annual premiums for every UK policyholder: in 2015, insurers detected 70,000 fraudulent motor insurance claims, costing a total of £800m [3].

Fleet managers can combat fraudulent claims against their company by employing a range of tactics, including:

Dashboard cameras: forward-facing dash cams can provide vital data when defending or settling at-fault claims and are particularly useful for disproving crash-for-cash frauds.

Telematics: these systems record data on all vehicle movements, so you can tell exactly where a vehicle is at all times, how fast or slow it was travelling in the event of a collision and any unusual or erratic driving behaviours.

Trackers: even if you don’t have telematics systems onboard, a tracker can also guard against any fraudulent theft, pinpointing a vehicle’s location.

Driver training: preparing your drivers for common insurance scams is another way of protecting your fleet. Coach them to keep their distance from the vehicle in front, look out for tailgaters - who often work with another vehicle in front, which brakes suddenly while the driver is distracted by the tailgating vehicle - be alert for non-functioning brake lights on surrounding vehicles, and take extra care at roundabouts and junctions.

Fleet managers don’t have to be held hostage by the constantly rising insurance premiums that consumers have to accept. Spending a little time costing out self-insurance options and establishing anti-fraud initiatives can go a long way to saving a lot of money in the long run – and demonstrating that, as a fleet manager, you’ve got it covered.

[1] Car and home insurance news – 2016 quarter 4: http://www.theaa.com/insurance/british-insurance-premium-index

[2] Association of British Insurers: Fraud https://www.abi.org.uk/Insurance-and-savings/Topics-and-issues/Fraud

[3] The price of motor insurance shows no sign of reversing: https://www.abi.org.uk/News/News-releases/2016/10/The-price-of-motor-insurance-shows-no-sign-of-reversing